How does leaseback work and closing on the property?

Question

I might have a deal that another well known investor has but does not want to work on ATM. In the details it says 45 day leaseback and 150 on day 46 with a 5k hold.

SO i have a few questions here

1. who gets the money from the lease back or who gets the 5k hold?

2. so does this mean i can close on the property and i have to go ahead and pay and wait 45 days before i can get in there and work on the house ?

3. what things should i worry about with the lease back and waiting 45 days on top of the 3 month time period im giving myself to go in and out on this project?

thank you for your time.

Erik Checkur · Answer

1 - So it depends how the leaseback was written. By the 'hold', my assumption is you're referring to a deposit? Just like any rental situation, there is a security deposit that sits with the new buyers while the former sellers live in the home for x amount of days. After the time is up on the leaseback, the funds are returned to the seller as long as it is deemed the house was taken care of within reason. The 'rent' section for the length of time is typically separate from this deposit so that's my answer with the assumption you're referring to the 'hold' as the security deposit.

2 - Discuss what your plans are with the sellers turned tenants. Technically, it is your house so you can do some work but you also should respect their space while they gather their items to move. Usually in lease agreements, there are sections saying the owner can only access the house with prior notice, sometimes it says during business hours, and with proper notification before entering the premises. It all depends on how your lease back is structured in Texas. So in my experience, it's been more about open communication with what the sellers are comfortable with during the lease term.

3 - The main concern with the leaseback is that you have strangers living in your home. Sometimes people begin to not care when that's the case and they may not take great care over the next 45 days. Also, the worst is on your final walkthrough, all the appliances are working. Then you have the leaseback and 45 days later, when you get into the house, or simply anytime after the initial closing date within those 45 days, your water heater breaks and it's still your responsibility to fix even though you haven't stepped foot into the home. With that, home warranties are incredible. I usually get mine for clients as closing gifts through American Home Shield.

Pedro Amador · Answer

Thank you for your time sir!, so this is a property a local investor came across and he says he doesn't want to deal w it cause its too far so im assuming i will have to make accommodations with him ?

my worries are this, i have to wait 45 days before i can even get started w demo. then anpther 4 months before its sold so idk if i want to run a 5-6 month project looking at maybe maybe a 45 spread after taxes and closing cost.

also the house needs heavy remodel. roof ,foundation, hvac, landscaping everything. so im not worried about the ppl taking care of the home at this point because its trashed.

hank you for your time sir!, so this is a property a local investor came across and he says he doesnt want to deal w it cause its too far so im assuming i will have to make accomidations with him ?

my worries are this, i have to wait 45 days before i can even get started w demo. then anpther 4 months before its sold so idk if i want to run a 5-6 month project looking at maybe maybe a 45 spread after taxes and closing cost.

also the house needs heavy remodel. roof ,foundation, hvac, landscaping everything. so im not worried about the ppl taking care of the home at this point because its trashed.